From Bankruptcy

Each situation is different. You need to consult with an attorney to know what’s right for you. Hours on the internet searching advice from forums are no substitute for specialized advice when deciding to file bankruptcy. Lund Law Office offers a low-cost confidential consultation with an attorney to determine the level of assistance you may need. Call us to set up an appointment.

You may have alternatives outside of bankruptcy available to you. You also need a thorough analysis to determine which chapter of the bankruptcy code your case will be filed under, and what assets you can keep after filing. But the right question is the first question: “should I file bankruptcy?”

Here are my recent estimations, based on case law and experience when helping people decide if they should file bankruptcy or not: the decision to file is highly dependent on the income and expenses of your household and the nature and amount of your debt. Please note I’ve seen most of these situations firsthand.

Should I File Bankruptcy?

PROBABLY

 Your unsecured debt is over 40% of your gross income (before taxes are taken out)

 You owe child support arrears but can pay them back over five year period

 You are getting garnished and have already maxed credit cards and pay day loans

 You lost your job, the debt is mounting, but a new job is on the horizon

 You owe income taxes and can realistically pay them off within a five year period

 Your medical bills are gigantic, but you now have affordable health insurance for the foreseeable future

Should I File Bankruptcy?

SLOW DOWN (This is where you *really* need an experienced bankruptcy lawyer)

 You transferred property to a relative so the spouse wouldn’t get it in the divorce

 You transferred the cabin to your brother not thinking you would ever file bankruptcy

 Your debt is old and past the statute of frauds, or personal income taxes are almost three years old

 You just received your big tax refund and paid back family and friends with it

 You have medical problems and insurance isn’t helping in the near future

 You owe your spouse for alimony, or for marital debt, from the divorce

 You lost your job, the debt is mounting, and there are no new jobs in sight

 You live on social security and have no assets

 You’ve been paying relatives back on loans that they have, or you co-signed with them

 You’ve filed bankruptcy in the last eight years (with some exceptions involving a Chapter 13)

 Most of your debt is business debt and you think you should file bankruptcy for your business

 You plan on filing bankruptcy before you settle your personal injury case

 You might receive an inheritance

 You share a bank account with relatives or non-spouses and help support them

 You are married but plan on filing with your spouse

 You recently took out a 401k loan and gave it to (often help) friends and family

 You recently took a mortgage out on your property and used the money to pay credit cards or family

Should I File Bankruptcy?

CHAPTER 13, or OTHER DEBT RESOLUTION STRATEGIES ARE NEEDED

 Most of your debt is from student loans

 Most of your debt is from restitution for fraud or criminal behavior in other cases

 Most of your debt is in the form of payroll or withholding taxes (I can help you handle property or income taxes)

 You have astounding child support arrears

 Your only debt is the mortgage arrears and you are underemployed and upside down on the house

Should I File Bankruptcy?

A CONSULTATION WITH A CRIMINAL LAWYER IN CONJUNCTION WITH YOUR BANKRUPTCY LAWYER IS RECOMMENDED IF YOU DON’T DISCLOSE THESE SITUATIONS BEFORE YOU FILE, AND EVEN THEN, YOU HAVE TO REASSESS ON WHETHER YOU SHOULD FILE

 You recently took out pay day loans and maxed out credit cards, knowing you would file bankruptcy on them (possible crime)

 You transferred the cabin to your brother innocently thinking that it would “stay out” of the bankruptcy (can settle, usually)

 Insurance proceeds came in for the loss of the house or the car but you didn’t pay the bank on the loan (possible crime)

 You intentionally sold your fleet of Harleys and deposited the proceeds into your 401k (can settle, usually)

 You took student loans out for somebody other than yourself or used the proceeds to help with other people’s debt (possible crime)

For many people I’ve helped, some of the reasons listed above might conflict with whether you should file or not. I can identify these issues and help you answer ” should I file bankruptcy? ” in a more in-depth consultation by appointment if necessary.

What follows is a bankruptcy memo written by a long-time friend and mentor, Don Reckseen, who is among many things, a bankruptcy attorney in Colorado. I have tremendous respect for him and his approach to bankruptcy, and with his permission, I’m sharing his perspective.

One of the areas I got the most from was bankruptcy. You can see people heave a sigh of relief—they are scared, frustrated, embarrassed and disillusioned all at once. Curing their debt problems is easy—any secretary can do it—but reinstating their morale, now that needs an expert. I got so good at this and got such satisfaction that I fidgeted waiting for the next BR client. (I quit before the new rules.)

Here is my bankruptcy speech: First, you need to understand that bankruptcy is not a declaration of defeat or failure like it was in your parents time (anytime before 1970). It is now a financial planning tool, and it is an effective one.

Next, there are two things about history you should understand.

1) When Columbus sailed, everyone thought he was “going over the edge”, so he could not find crews. But a faraway voice from the debtor’s prison wailed “I’ll go”. After reaching America, the men came ashore, found a big rock, and chiseled “In this country, you do not have to pay your debts” on it. This simple factor is the main reason why our economy developed in a unique (and it still is) way because it took the government out of private business. Until then, no one believed that private individuals could run an economy, but it not only worked, it exploded into an incredibly powerful economy. The new rule, however, having a huge effect on the economy, was largely ignored because there was very high social pressure for people to pay their bills. This pressure lasted until after WW II. Then, strange things began to happen.

2) Ford discovered that you could make more money by giving your workers more money. Sears discovered that you could make more money by not requiring your customers to pay. Your parents and grandparents preached: “Whatever you do son, protect your credit.” That advice was valid in the cash economy of the time, but the economy shifted dramatically to a credit economy, and that advice needs modificati9on. What your ancestors were talking about when they used the word “credit”, was “your good name and community reputation”. But soon, the credit economy changed everything*, and now, NO ONE has a good name or a community reputation. (Do any of your friends, associates or relatives pay all their bills in a timely fashion?? A) You don’t know, and B) You don’t care.)

*If $100,000 worth of groceries leaves the supermarket on Friday, the night deposit will be $10,000 or less. Today the word credit has a new meaning (ask Dad or Granddad if this is what they meant by “credit’.) “Credit” now means the ability to buy things you cannot afford. To the extent this is true, we should advise our children—“Do not get credit.” (This is Suzy Orman’s advice—she gets it.) This is the second historical development you should try to understand.

Finally, since you are so saddled with the “credit” brainwashing of your ancestors, take heart. Look at your creditors. They sold you things on credit or paid for things you wanted but could not afford.

That is their business.

On the day they did this, as businessmen, they knew just how many of their borrowers would file bankruptcy, and, just like Sears knows just what they will lose to shoplifting, they add this cost into their transaction with you.

Read your contract—it says: “I promise to pay $____ per month, unless I elect to file bankruptcy, in which case, you get zero. In return for your allowing me this option, I agree to pay 19 percent interest.” So, by filing bankruptcy, you are not “breaking a promise”, you are simply electing an option given to you by the creditor.

The simple new economic fact is that the lenders and sellers do not need to ever collect on the principal, so long as they are paid an extremely high interest rate. Sears built its tower with money borrowed from insurance companies that was secured by Sears customers accounts, and pays its Tower mortgage with interest collected from those same accounts. The principal is irrelevant.

DON’T FEEL BAD.

Become a one unit cash economy and you will be much happier than almost everyone—it is orange crate furniture until you save enough for a kitchen table, just like your granddad. Or participate in the credit economy, but not with vigor, and “don’t buy things you cannot afford.”